Correlation Between Balanced Fund and Muirfield Fund

Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Muirfield Fund at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Balanced Fund and Muirfield Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Balanced Fund Retail and Muirfield Fund Retail, you can compare the effects of market volatilities on Balanced Fund and Muirfield Fund and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Balanced Fund with a short position of Muirfield Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Muirfield Fund.

Diversification Opportunities for Balanced Fund and Muirfield Fund

0.97

Correlation Coefficient

Balanced Fund  Muirfield Fund

Almost no diversification

The 3 months correlation between Balanced and Muirfield is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Muirfield Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Muirfield Fund Retail and Balanced Fund is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Balanced Fund Retail are associated (or correlated) with Muirfield Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Muirfield Fund Retail has no effect on the direction of Balanced Fund i.e., Balanced Fund and Muirfield Fund go up and down completely randomly.

Pair Corralation between Balanced Fund and Muirfield Fund

Assuming the 90 days horizon Balanced Fund is expected to generate 1.25 times less return on investment than Muirfield Fund. But when comparing it to its historical volatility, Balanced Fund Retail is 1.36 times less risky than Muirfield Fund. It trades about 0.08 of its potential returns per unit of risk. Muirfield Fund Retail is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  821.00  in Muirfield Fund Retail on August 22, 2024 and sell it today you would earn a total of  254.00  from holding Muirfield Fund Retail or generate 30.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Balanced Fund Retail  vs.  Muirfield Fund Retail

Balanced Fund Retail

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Balanced Fund Retail are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Balanced Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Muirfield Fund Retail

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Muirfield Fund Retail are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Muirfield Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Balanced Fund and Muirfield Fund

The main advantage of trading using opposite Balanced Fund and Muirfield Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Muirfield Fund can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Muirfield Fund will offset losses from the drop in Muirfield Fund's long position.

The idea behind Balanced Fund Retail and Muirfield Fund Retail pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.